Challenges in managing configured Hi-Tech products

This blog covers some of the key challenges faced by Hi-Tech Industries while managing complex BOM structure and Routing in order to react very quickly to the rapid change business environment.This blog also covers the need and importance of keeping the track of the changes happening in the BOM structure and Routing with unique identifier.It is also discussed how SAP Variant Configuration component is powerful to manage the challenges of Hi-Tech Industry BOM and Routing maintenance and faciliates the Hi-Tech Business to stream line their business process.

Complexities in managing BOMs and Routings of Hi-Tech Products

BOM and Routing Maintenance

Frequent changes in the design which drives for the introduction of alternate components in the existing BOM design and Routing set up.

Frequent introduction of new products, calls for the ability to create BOM and Routing with all business rules and test it very quickly with out wasting much time.

Changing customer requirements in the information on Invoicing document and cost break up etc., compels the business to make a change in the BOM structure.

To assess the impact on the changes arise from the above scenarios with robust and quick testing.

Engineering change Management

Need to implement the changes of BOM and Routing very easily and track the changes with fewer efforts as Hi-Tech Business spends more time on innovation.

Need to assess the impact of changes in BOM and Routing accurately which is very difficult with the nature of configurable materials and complex business rules assigned to it.

Need to assess the impact of a change to overall conformance requirements with simulation capabilities

Need to have global change traceability throughout the change implementation in the enterprise, across all process areas.

Need to handle multiple changes on same object with in a short period of time

Need to introduce alternate components very quickly as part of the design change or shortage of components in the market.

Need to have flexibility in the change implementation date as per Business convenience aligning customer expectations with out impacting current design and production.

Why SAP Variant Configuration?

Variant configuration is a powerful tool to manage complex Bill of Materials and Routings and to implement complex Business and Engineering rules associated with configured Hi-Tech Products.Also Engineering Management functionality helps to manage and track BOM and Routing changes.Variant Configuration is seamlessly integrated with sales, engineering, Production, Purchasing and costing. With this tool, variant pricing can be determined very quickly and more accurately and ensures that production costs do not overstep the mark.

In High Tech Industries, BOM structure is considered to be very complex by the virtue of its design as there would be different levels of configurable BOMs with various kinds of grouping like virtual product grouping of similar nature of configurable models (example : all types of Assemble to order products) as a phantom assemblies with out the need for cost roll up and actual configurable models with the controls for Production relevant, Sales relevant and Cost relevant etc., Another main differentiators would be handling and managing the software that goes in the models.

Usually Hi-Tech components are coupled with complex business rules to determine the product or process step amidst large number of options. SAP Variant configuration has different types of dependencies like selection condition, procedures and constraints which can translate any level of complex businesses rules in to object dependencies and these dependencies gets assigned BOM and Routing.

Features of SAP Variant Configuration

The below are the high level features of SAP Variant configuration which helps to manage all the critical business challenges involved in High Tech Industry. You may go to http://www.help.sap.com/ to get more detailed information on the complete architecture of Variant configuration. But in this blog, I intend to relate how these features can support Hi-Tech Industry to meet the business challenges while producing/procuring complex configurable products.

Reduction in number of BOM and Routing with Super BOM and Super Routing concept

The concept of Super BOM facilitates to manage the BOM with different combinations of characteristics to manufacture/procure the complex configured models. This results in reduction of number of individual BOMs and materials to a greater extent and helping business to manage the frequent changes very easily.

In the similar way, Super Routing covers the production process for all possible combination of variant products and their associated manufacturing steps.SAP Variant configuration is very flexible to respond to the changing customer needs and design changes in a very short time by modifying the dependencies (business rules) assigned to the components of the Super BOM and assigned to the operations in the Super Routing.

Flexibility and Control Mechanism

SAP Variant configuration has a centralized control through configuration profile which controls the configuration function whether to happen in sales order, planned order etc along with type of BOM explosion and BOM application. Also Configuration Profile consists of Interface design which can help you to display either the characteristic name or the description, allowed screens in the sales order and which screen needs to be set as a first screen in the sequence. Configuration profile is also controls the maintenance of certain object dependencies which needs to be controlled centrally like variant pricing etc.,

Planning in Variant Configuration

SAP has a wide range of planning strategies which can be chosen as per the type of planning that suits the business models (manufacturing /subcontract manufacturing scenarios) and planning processes like assembly to order, configure to order or characteristics based planning etc.

For an Example, Planning material concept is used with Strategy 65 helps Hi-Tech Industries to keep some of the common assemblies which contains all the non-variant parts and most commonly used in the configurable final products/sub-assemblies. With this concept, all non-variants are procured / produced before sales order is received. It is also possible for planning the Planning Materials without reference to any sales order. This would reduce manufacturing cycle time and supply can be made very faster. Also this would help to reduce the overall life cycle of the product when the new product is launched in the market which is the main requirement for any Hi-Tech business.

Ability to manage Software components and secure activation

As mentioned earlier, managing software components and controlling the access through a secured product key is the main differentiator in working with Hi-Tech Products. Software a component which is also a part of the Super BOM, get assigned with set of business rules to identify that it is a software component. SAP system is custom developed with a user exit to call a background program which identifies such software components during BOM explosion at the time of Sales order creation. Then it is interfaced with e-commerce application to create a product key.Once the product is delivered to the customer, again this key gets activated in the e-commerce application in a secure way so that customer can load the software applications in their system.

Material Variant

High Tech Industry needs to follow a process to fulfill customer demands very quickly with out much lead times on certain configured products with the set of frequently selected options (characteristics). These kinds of products are manufactured/sub-contracted based on the forecast and delivered from the stock when the characteristics options are matching when the sales order is entered. This is another unique feature that supports the business requirements of configurable materials in Hi-Tech Industry.For material variants, a separate material master record is created with a material type that is kept in stock. You can link the material variant to the BOM and routing of the configurable material. Along with its operations, appropriate BOM items are derived from the characteristic values associated with the variant.

Drop Ship Process

Now a days, Drop Ship process is becoming very common business process in Hi-Tech industries to cut down manufacturing cost and to focus more on Research and development. SAP Variant configuration supports this process and offers a flexibility to choose an option while creating a sales order whether the product needs to be manufactured internally or procured from sub-contracting partner. Variant configuration is well integrated with Sales and Distribution, purchasing, Production Planning and costing and there by facilitates the business either to go for manufacturing or sub-contracting process.

Internet Pricing and Configurator (IPC)

For many Hi-Tech companies, configuration has become a central part of the sales process, whether it is carried out by sales staff at the customer location or via customer and trader portals. In all cases, online access to the product logic stored in SAP ERP, including the material and product prices is essential, as this is the only way customer-specific variants can be created correctly and sales prices can then be calculated reliably.

With Configuration Engine, SAP customers who use sales channels both via SAP ERP, for example in connection with the SAP E-Commerce for SAP ERP web shop solution, and via SAP CRM now have a uniform configuration tool for product configuration.

Self-contained knowledge base in Configuration Engine is the prerequisite here. The configuration logic (such as product data, classes, characteristics, bills of material, and object dependencies) is stored and maintained in SAP ERP Variant Configuration and then it is extracted in the form of knowledge base objects and loaded to Configuration Engine via SAP standard interfaces. These knowledge bases are maintained in a similar way to other variant models in SAP ERP.

This feature is very much useful for the High Tech Industries to deal with configurable products as it gives better visibility of configured product prices instantly and accurately.

Change Pointers functionality

In High tech industries, Variant configuration related changes are done very often at large pace due to dynamic business and engineering department changes on the product. So apparently robust testing these changes with lesser efforts is a requirement for Hi-Tech Industry.

SAP has change pointer functionality in order to smoothly incorporate all the variant configuration work in a dedicated testing client(instance) to carry out all variant configuration related testing very easily with out taking any risk in the production environment.

Using Change pointers you can automatically move the new changes coming into Production client for example new BOM’s and BOM changes into your Test client.

Change pointers works on ALE (Application Link Enabling) functionality through an idocs (electronic data transfer). You can specify various message types which is linked with SAP objects like materials master, BOM,, characteristics, class, object dependencies etc., that need to be moved from source to target client. Once any of these objects are changed or newly created in source client, change pointer captures that change in a table and the change is moved thru a program to trigger the Idocs. This also can be set a batch job with defined intervals to carry out the changes to the test or target client.

In the test client, business users define the new rules, simulate and test it very easily and assess the impact and then move it to production client.

Engineering change management

To incorporate every day engineering changes in high tech industries, Engineering change management (ECM) turns out to be best functionality provided by SAP to track your changes with respect to each Change numbers associated with effective date.

With ECM you can change the BOM structures as per the business changes and it can be implemented when all business rules are tested and business is ready to go on with the change.

Using change numbers you can write dependencies or add/change the components etc in the BOM and can make them available in future. In this way there will not be any impact on current environment and also you attain the leverage to launch the product on time.